What is mediation? How is it different from arbitration?
Mediation is quite simply, the process whereby an independent person (the mediator) has as his or her sole purpose to bring the parties together and come to a settlement of a dispute. The mediator does not act as a judge and does not “rule” whether one party is right or wrong. The mediator will not force or order one party to pay the other or order any other relief sought by a party against the other. If the parties do not come to a settlement, they have lost no rights, although they have lost usually a day of negotiating and costs of mediator and their attorneys for a day and possible travel costs.
Arbitration, to the contrary, is similar to going to a court litigation trial whereby the parties present their witnesses and evidence and the arbitrator makes a binding ruling as a judge would to decide the case in favor or one or the other.
Mediation works when the parties have stopped communicating and are “deaf” to the other side’s rational discussions or position but when a neutral 3rd party comes in it is easier to open up to more rational view of the matter. Mediation also works when the parties are close to settling but can’t get over one or more main hurdles of contention. The use of a professional mediator in this regard is extremely helpful to bring the parties together and unlock the closed minds with a neutral and objective professional 3rd party taking a look and suggesting settlement options.
The mediator generally listens to both sides of the dispute, independently outside the presence of the other party and discusses the strengths and weaknesses quite candidly and objectively with the party he or she is with, and emphasizes that party’s legal weaknesses, if the parties do not settle and must litigate or arbitrate. The mediator offers up potential solutions that even some the parties may not have considered. A great mediator is well worth the time and expense for the day, to avoid having to take the dispute further.
The down side is mediation is not binding–both parties still have to agree to settle and be willing to give in somewhat or it will be a waste of time and money. If either or both of the parties are not open to settlement at all, and continue to dig their heals in to try and persuade the mediator they are “right” -mediation won’t work because that is not the function of the mediator. It’s not about who is right but about coming to a mutual settlement. A good mediator is able to get parties off their dug in positions by explaining the costs of litigation vs the fact nothing is black and white even if you think it is, it is always a risk you lose at arbitration or litigation. The mediator will also attempt to ware both sides down as the day goes on until they see their was clearer to how settling the matter makes more sense.
Some franchise agreements require mediation prior to either party filing arbitration or litigation. Or the parties can voluntarily agree to mediation. If it is required, the Franchise Agreement will dictate where the mediation is to take place, which is usually in the Franchisor’s home state. While there are California laws that may void out of state venues for arbitration and litigation, the protections do not apply to mediation. This is one way a Franchisor may stave off an arbitration or litigation filing by a franchisee. However it is critical that a franchisee that has a dispute not sit on his rights as the Franchise agreements almost always also have a shortened period within which to bring claims or lose those rights.
If you are a franchisee with a claim, you are advised to seek out a franchisee attorney‘s review of your franchise agreement and advice you of your rights and options. You may have ore rights that just the issue you were unhappy with. Franchisors are required to comply with extensive franchise laws and a good franchise attorney will check those out as well as your specific concern.